Freddie Mac Reduces Taxpayer Exposure With Credit Risk Insurance

Posted by Patrick Barnard on November 13, 2013 No Comments
Categories : Residential Mortgage

Government-sponsored enterprise Freddie Mac has obtained an insurance policy underwritten by Arch Reinsurance Ltd. to cover up to $77.4 million of credit losses for a portion of the credit risk associated with a pool of single-family loans funded in the third quarter of 2012.

Freddie Mac says this new insurance coverage is intended to attract new sources of private capital from non-mortgage guaranty insurers and reinsurers interested in assuming a portion of the credit risk on specified portions of Freddie Mac's single-family mortgage loan portfolio.

‘This is part of our business strategy to expand risk-sharing with private firms, thus reducing taxpayers' exposure to losses from mortgage foreclosures,’ says David Lowman, executive vice president of single-family business for Freddie Mac. ‘We've tapped into the global insurance community's appetite for U.S. mortgage credit exposure and would like to do more of these policies in the future.’

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